Marketing

Prof. CaroIine Benton

Student Name: SAM, Samer Student .D NO: 35072318 1











IndividuaI Assignment #2
CoIa Wars Continue'Coke and Pepsi in 2006













Date of submission'2007/12/07

Analyzing the US soft drink industry we can state that the two companies which have been
competing each other are Coke-Cola and Pepsi-Cola. Coke-cola, throughout the history of
this industry, used to be the dominant competitor for Pepsi, which in turns at some phases
tried to be a dominant in some aspects too. Concerning the reaction pattern, Pepsi was a
tiger competitor that reacted strongly and quickly to Coke-cola`s products and marketing
strategies. Actually, in accordance to the role each company played in the US soft drinks
industry, we can find out that Coke has manipulated the market leader strategies, whereas
Pepsi has used the market challenger strategies.

Firstly, Coke-cola, as a market leader, had the largest market share, so it let the other firms
such as Pepsi-cola, Calbury Schweppes and others, in price charges, new product
introductions, distribution coverage and promotional intensity. n order to remain number one
Coke expanded its total market, defended its market share and expanded the market share.
Expanding the total market, Coke realized that within the CSD category, the cola segment
maintained its dominance, so that when this market expanded Coke gained the most, and
that was achieved by being the first concentrate producer to the fountain sales, getting more
usages such as of "every man in uniform gets a battle of Coke-cola for five cents wherever he
is and whatever it costs the company and experiencing with new cola and non-cola flavors.

Secondly, to defend its market share Coke used the following six defend strategies:

. Position defense:

That was through dominating the fountain sales, pioneering open-top coolers for use in
grocery stores and other channels, developing automatic fountain dispensers and marketing
vending machines, buying up poorly managed bottlers and infusing them with capital and
quickly reselling them to better performing bottlers and creating an independent bottling
subsidiary.

2. FIank defense:

An example of that is introducing purified-water products that had surged to become leading
beverage brands.

3. Preemptive defense:

As a market leader Coke chose some of preemptive defense measures such as:
O Began to experiment with new cola and non-cola products.

O New packaging options

O New products (Fanta, Sprite, Low-calorie Tab)
O Diversification into non-CSD fruit juice, coffee, tea, hot chocolate and spring water.

. Counteroffensive defense:

O When Pepsi tried to demonstrate that consumers actually preferred Pepsi to Coke, by
conducting blind taste tests, Coke countered that with rebates, retail price cuts and a
series of advertisement that questioned the test validity.
O Coke switched from using sugar to using high fructose corn syrup, as a lower-priced
alternative.

. MobiIe defense:

During the 1960s, Coke focused primarily on overseas markets, apparently basing its strategy
on the assumption that domestic CSD consumption was approaching a saturation point, so
that about 70% of Coke`s sales and about 80% of its profits came from outside the United
States, and enjoyed a world market share of 51.4%, Also, Coke diversified into bottled-water
business and non-CSD products such as fruit juice, team, coffee and hot chocolate.

6. Contractions:
Such as selling off most the non-CSD business including wine, coffee, tea and industrial
water trademark, while retaining Minute Maid.

Thirdly, to expand the market share Coke-cola invented its market segmentation, product
and place as shown in the following chart.

Market
segmentation
Product Place
Non-Carb
Beverages
Energy drinks
Sports drinks
Bottled water
Tea-based drinks
More than 10 major brands and 17 container
types
nternational
markets; Mexico,
Brazil, Germany,
China, United
Kingdom

So, as Coke-cola used the market leader strategies, Pepsi-cola which was the second rank
in the US soft drinks industries, has used the market challenger strategies. Actually, Pepsi
strategic objective of competing with Coke was increasing its market share and achieve that
objective Pepsi chose general attack strategies and some specific attack strategies.

. GeneraI attack strategy:

Pepsi`s general attack strategy was a pure frontal attack, by means of it Pepsi was directly
matching Coke`s products, promotions, place and price strategies. So that Pepsi`s products
were the same as Coke`s such the carb beverages, non-carb beverages and bottled water,
Also, Pepsi tried to have the same promotion strategy and the same pricing strategy as well
as the place (domestic and international). n fact, this frontal attack strategy was accompanied
with a flanking, bypass and Gorilla attack which are described in figure 1.


















2. The specific attack strategy (tactics):

Focusing on sales through retail outlets.
Entering the fast-food restaurant.
Lower price (20% than that of Coke.)
Spending extra income on advertising and promotion.
ncreased international beverage volume.
Broaden the base of innovation.
llanklng
Unre|ated products sports
dr|nks teabased dr|nks and
refr|greated [u|ce
8ypass
benef|t|ng from Arab and
Sov|et exc|us|on of Coke |t
moved |nto the m|dd|e Last
and Sov|et 8|oc
Cuerllla
wag|ng sma|| |nterm|ttent
attacks to harass and
demora||ze the opponent and
secure permanent and secure
permanent footho|ds
|auch|ng eps| cha||enge
conduct|ng b||nd tests try|ng
to dom|nstrate that
consumers preferred eps| to
Coke
Figure 1 General attack strategy